Forecasting UK industrial production over the business cycle

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This paper examines the information available through leading indicators for modelling and forecasting the UK quarterly index of production. Both linear and non-linear specifications are examined, with the latter being of the Markov-switching type as used in many recent business cycle applications. The Markov-switching models perform relatively poorly in forecasting the 1990s production recession, but a three-indicator linear specification does well. The leading indicator variables in this latter model include a short-term interest rate, the stock market dividend yield and the optimism balance from the quarterly CBI survey. Copyright © 2001 John Wiley & Sons, Ltd.
Original languageEnglish
Pages (from-to)405-424
Number of pages19
JournalJournal of Forecasting
Issue number6
Publication statusPublished - Sept 2001


  • Business cycles
  • Financial variables
  • Forecast performance
  • Leading indicators
  • Markov-switching models


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